Federated International Strategic Value Dividend Fund (IS) IVFIX

Share Classes Product Type Asset Class Category
Mutual Fund Intl/Global Foreign Large Cap
As of 07-31-2018

Highlights

  • Federated International Strategic Value Dividend Fund provided a gross-weighted average dividend yield of 5.05% at month end.
  • This was well ahead of the 3.10% weighted average yield provided by the MSCI World ex-U.S. Index and also exceeded the 4.82% yield provided by the fund’s benchmark, the MSCI World ex-U.S. High Dividend Yield Index.
  • For the rolling one-year period, 34 companies raised their dividends, accounting for 38 increases overall and two special dividends.
  • The strategy’s return in July outpaced that of the broad market, as Health Care, Financials and Consumer Staples holdings outperformed.

Looking Back

Returns in the global equity markets were positive in July, although international stocks underperformed their U.S. counterparts as the MSCI World ex-U.S. Index generated a return of 2.46% in the month, while the S&P 500 returned 3.72%.  Within the broad market index, returns across the GICS sectors were mixed in July with Health Care, Telecom and Financials leading the market, while Consumer Discretionary, Information Technology and Real Estate lagged.  Investors’ year-long penchant for lower-yielding stocks did reverse course in the month, with the broad market’s highest-yielding quintile outperforming its lowest-yielding quintile by 110 basis points. 

Performance

Federated International Strategic Value Dividend Fund generated a total return of 3.69% (A shares at NAV) in July 2018. This compares to a return of 3.40% for the fund’s benchmark, the MSCI World ex-U.S. High Dividend Yield Index, and a 2.46% return for the broad-based MSCI World ex-U.S. Index.  With the fund’s investments in the dividend income-producing segment of the international market, and its 3-year beta versus the MSCI World ex-U.S. Index of 0.68, the strategy’s short-term returns are not expected to move in line with the broad market.

Performance quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than what is stated. Other share classes may have experienced different returns than the share class presented. To view performance current to the most recent month-end and for after-tax returns, click on the Performance tab. Performance does not reflect the maximum 5.5% sales charge for A Shares. If included, it would reduce the performance quoted.

Click the Performance tab for standard fund performance.

Performance Contributors

  • The fund’s Health Care investments (14.22% ending weight) posted strong performance with a 8.77% weighted average return in July, driven by Orion, AstraZeneca, and Sanofi, which returned 27.86%, 10.93% and 8.56%. respectively.
  • The portfolio’s Financials holdings (18.50% ending weight) contributed a 5.79% weighted average return in the month, led by SEB and Swedbank, which returned 12.48% and 10.52% each.
  • Consumer Staples holdings rebounded in July, with a weighted average return of 5.65%, as Ambev returned 11.02%, British American Tobacco 8.98%, Kimberly-Clark de Mexico 8.84%, and Philip Morris International 6.89%.

Click on the Portfolio Characteristics tab for the fund’s top 10 holdings

Performance Detractors

  • The fund’s weakest sector performance was noted in Utilities (18.27% ending weight), which delivered a weighted-average return of -0.03% in the month, primarily driven by U.K. utilities as Brexit concerns resurfaced in early July.  For the period, U.K.-based utility holdings United Utilities, National Grid, and SSE returned -6.37%, -3.62%, and -3.52%. respectively.
  • Norway delivered the portfolio’s weakest country performance. Shares in the strategy’s sole Norwegian holding, Telenor (1.04% weight), returned -4.54% in the period as the company reported slower second quarter service revenue growth.  
  • Telefonica Brasil (0.74% weight) returned -6.55% in July as competitive pressures slowed post-paid mobile revenue growth.

How We Are Positioned

While macroeconomic data points related to global trade, inflation, consumer and business confidence and spending, geopolitical events and overall economic growth all impact share price movements in the near term, Federated International Strategic Value Dividend Fund remains committed to its focus on the long term drivers of total return: dividend yield and dividend growth. To pursue those goals, the portfolio remains concentrated in Consumer Staples, Integrated Energy, Health Care Pharmaceuticals, Telecom Services, Utilities and high-quality Banks and Insurers. These segments of the economy contain the type of high-quality, dividend-friendly stocks that the portfolio seeks out, enabling the strategy to provide investors with the opportunity for a high dividend yield complemented with dividend growth. That dividend growth may help the fund both sustain its high yield and outpace inflation. Such investments also tend to be less volatile than the broad market, offering lower downside risk characteristics for the portfolio.

Update as of August 16, 2018

The unfortunate events in Italy have prompted us to exit our position in Atlantia. The bridge on the A10 is part of the Autostrade per l’Italia (ASPI) concession, which is 87%-owned by Atlantia. Although the company has said they are fully insured for any damages to the roadway and third parties, the event has caused us to reevaluate our dividend growth forecast for Atlantia.